Innovation vs. Aggregation

An Exercise in Profound Theory, created by & Compliments of Marshall Thurber & Matthew Cross

Case Study 1

TV Guide was purchased in l987 by media empire builder Rupert Murdoch for more than $2 billion. This publication is essentially nothing more than a well-packaged listing of television program broadcast schedules—information readily available free to anyone from a number of sources.
Despite this, the purchase price for TV Guide had a market valuation higher than any one of the major broadcast networks (CBS, ABC, or NBC) at that time.

Question: Why would a simple program list be more valuable than an actual broadcast network?

Case Study 2

The Official Airlines Guide (OAG), a listing of monthly flight schedules, was sold in l988 for $750 million. OAG simply consolidated flight information, yet this basic concept created a business with a greater market value than all but the largest airlines. At the time, OAG’s purchase price was almost triple the value of the Eastern Airlines shuttle, about three times what TWA paid for Ozark Airlines, and only slightly less than the total market value of USAir.

Question: Why would a basic list of flights be worth more than an entire airline?

Case Study 3

Quotron Corp. provides information about security prices to brokerage companies. Purchased by Citicorp in l986 for $628 million, Quotron did not possess proprietary access to securities information. It simply filled a need that brokers hadn’t attended to, by capturing securities transaction information and recycling it back to the brokerage industry that had generated the information in the first place. This created a business with a market value greater than the prices paid for several leading brokerage houses in the late l980s, including Paine Webber and Smith Barney.

Question: Why would a company that simply lists price quotes be worth more than companies that evaluate those quotes and execute the actual buy/sell transactions, even when it does not make a profit?

Question: What profound theory is validated by the above observations?